End of Real Estate Stock Boom ?

February 11, 2007

With the Indian inflation at a record high, 6.58% and interest rates at a four year high, it maybe the right time to exit Indian Real Estate Stocks as the correction has already begun warned Analysts with several brokerage houses.

Three Stocks, Mahindra Gesco Developers Ltd, Parsvnath Developers Ltd and Peninsula Land Ltd are among the 10 worst.

A six-bedroom duplex apartment in the Malabar Hill area in South Mumbai, where Bollywood actor Vinod Khanna and Citigroup Inc.’s India head Sanjay Nayar reside, sold for about Rs25 crore ($5.7 million), according to the buyer, Rakesh Jhunjhunwala.

Mahesh Nandurkar of CLSA Asia Pacific Markets said,

While a decline in housing affordability and potential oversupply could weaken prices in the near term, the long term outlook remains attractive on strong demand.

Parameswara Krishnan of DNB Nor Asset Management said,

Property-stock valuations are approaching bubble territory. We should see some correction. He said he is avoiding real-estate shares. As more supply of paper hits the market, valuations and returns will come down to more stable levels.

Purvankara Projects, Omaxe, DLF, Kolt Patil and others are waiting for an IPO.